Correlation Between PLAY2CHILL and STMicroelectronics

Can any of the company-specific risk be diversified away by investing in both PLAY2CHILL and STMicroelectronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PLAY2CHILL and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAY2CHILL SA ZY and STMicroelectronics NV, you can compare the effects of market volatilities on PLAY2CHILL and STMicroelectronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PLAY2CHILL with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAY2CHILL and STMicroelectronics.

Diversification Opportunities for PLAY2CHILL and STMicroelectronics

0.7

Correlation Coefficient

PLAY2CHILL  STMicroelectronics

Poor diversification

The 3 months correlation between PLAY2CHILL and STMicroelectronics is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PLAY2CHILL SA ZY and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and PLAY2CHILL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PLAY2CHILL SA ZY are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of PLAY2CHILL i.e., PLAY2CHILL and STMicroelectronics go up and down completely randomly.

Pair Corralation between PLAY2CHILL and STMicroelectronics

Assuming the 90 days horizon PLAY2CHILL SA ZY is expected to generate 1.48 times more return on investment than STMicroelectronics. However, PLAY2CHILL is 1.48 times more volatile than STMicroelectronics NV. It trades about 0.16 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.2 per unit of risk. If you would invest  62.00  in PLAY2CHILL SA ZY on April 24, 2025 and sell it today you would earn a total of  28.00  from holding PLAY2CHILL SA ZY or generate 45.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PLAY2CHILL SA ZY  vs.  STMicroelectronics NV

PLAY2CHILL SA ZY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAY2CHILL SA ZY are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PLAY2CHILL reported solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PLAY2CHILL and STMicroelectronics

The main advantage of trading using opposite PLAY2CHILL and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAY2CHILL position performs unexpectedly, STMicroelectronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.

The idea behind PLAY2CHILL SA ZY and STMicroelectronics NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.